Attorneys who draft contracts or litigate contract disputes know that, with some exceptions, private parties generally have the freedom to agree to broad terms as they see fit as part of their business relationships. The same is not true for lawyers when entering into an attorney-client relationship. The bar rules place limits on a number of contractual terms that, even if agreed to by the client, are nonetheless impermissible red lines when it comes to an attorney’s ethical obligations.

These terms relate to core issues in the representation, including who the attorney can represent, the applicable fee, and the remedies for a breach of the agreement. Not only can the use of impermissible terms render an agreement unenforceable, but in some circumstances they can lead to attorney discipline. For that reason, it is important to keep the bar rules in mind when negotiating engagement agreements with clients. Below are some key limitations to consider.

Conflicts

In many situations, a business can sell a product to any customer who wants it and can afford it. However, given the special nature of the attorney-client relationship and the duties involved therein, lawyers may not always be able to represent just any client who wants to hire them.

Generally, there are two types of restrictions on an attorney’s ability to represent just “anybody.” First, there are prohibitions against conflicts of interest that impact when and whether an attorney can take on a new client.

Under Rule 1.7 of the California Rules of Professional Conduct, a lawyer is not permitted to represent a client if there is “a significant risk the lawyer’s representation of the client will be materially limited by the lawyer’s responsibilities to or relationships with another client, a former client or a third person, or by the lawyer’s own interests.” Parts (b) and (d) of that rule also detail the circumstances in which a conflict may be resolved.

Second, although not categorically prohibited, attorneys may choose to avoid representing clients in matters outside the attorney’s expertise, unless the attorney is willing to acquire that expertise in advance of the representation. Although there are some general practitioners who are well-suited to a number of different areas of law, there are some specialties that can create an increased risk of a claim for attorneys who are less familiar with the nuances of such a practice.

The Fee

There are also limitations on what an attorney can charge for her services. Pursuant to Rule 1.5(a) of the California Rules of Professional Conduct, “[a] lawyer shall not make an agreement for, charge, or collect an unconscionable or illegal fee.”

The rule goes on to identify a series of factors that bear on the unconscionability of a fee, including the amount of the fee in proportion to the value of the services performed; the relative sophistication of the lawyer and the client; the novelty and difficulty of the questions involved and the skill requisite to perform the legal service properly; and the amount involved and the results obtained. Rule 1.5(c) further prohibits the use of a contingent fee in specific circumstances, including as it relates to certain family law arrangements and when representing a defendant in a criminal case.

Another common issue is whether and to what extent an attorney can adjust the fees mid-representation. It is fairly routine for the fee to be revised as a result of, for example, a firm’s standard annual fee increase. In fact, many firms reserve the right to reasonable fee adjustments in their engagement letters.

On the other hand, a more drastic revision to the fee arrangement in the middle of the representation may be subject to additional scrutiny. The risk is that a court or bar will view that kind of adjustment a bit more skeptically because of the potential power dynamic between an attorney asking for more money and a client who may feel pressure to keep the attorney they have (given the status of the representation).

The Duration of the Agreement

Unlike general commercial contracts, clients generally may terminate the attorney-client relationship at any time for any reason.

On the other hand, attorneys may be more limited in terms of their ability to terminate the attorney-client relationship. There are detailed rules that specify when and how an attorney can end an attorney client relationship, as set forth in Rule 1.16 of the California Rules of Professional Conduct. Not following this rule can subject an attorney to discipline, sanctions, or even the risk of a legal malpractice claim if the client claims harm as a result of an improper withdrawal.

Some firms choose to outline the grounds for potential withdrawal in the engagement letter, which can include the client’s failure to timely pay fees or expenses; the inability to communicate or locate the client; or the refusal of the client to abide by or follow the attorney’s advice. Notably, however, even when an attorney and client agree on potential terms for withdrawal, withdrawal may still be subject to the approval of a court if the client is engaged in active litigation.

Limits on Liability

Attorneys generally cannot use the attorney-client agreement to prospectively limit their liability for malpractice, as a matter of public policy. However, California attorneys and clients may typically enter into valid and enforceable agreements requiring binding arbitration of both legal malpractice and fee dispute claims at the initiation of their relationship. Powers v. Dickson, Carlson & Campillo, 54 Cal.App.4th 1102 (1997).

Notably, those agreements are understood not to extinguish a client’s right to nonbinding mandatory fee arbitration (MFA) under Business & Professions Code §6200, which applies where such arbitration is requested by the client. Benjamin, Weill & Mazer v. Kors, 195 Cal.App.4th 40, 53 (2011).